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Davenport v. Djourabchi

United States District Court, District of Columbia

November 1, 2017

STUART MILLS DAVENPORT, et al. Plaintiffs,
v.
BAB AK DJOURABCHI, et al. Defendants.

          MEMORANDUM OPINION

          AMY BERMAN JACKSON United States District Judge

         Plaintiff Stuart Mills Davenport is the operator and sole owner of Big Bear Cafe, LLC, a restaurant on the lower level of the multistory row-house where he and his family live. Am. Compl. [Dkt. # 9] ¶¶ 7-10.[1]Defendants Babak Djourabchi and Monica Welt are husband and wife, and they were Davenport's neighbors. Id. ¶ 13. On September 21, 2006, defendants loaned Davenport $80, 000, and in turn, he executed a Promissory Note for Business and Commercial Purposes ("Note") in favor of defendants. Id. ¶ 14; Ex. 1 to Am. Compl. [Dkt. # 9-1] ("Note"). This case arises out of defendants' efforts to collect on the debt and the bankruptcy proceedings that followed.

         On October 14, 2015, Davenport filed for Chapter 13 bankruptcy protection in the U.S. Bankruptcy Court for the District of Columbia to prevent a threatened foreclosure on his property by defendants. Am. Compl. ¶¶ 105-06. Defendants filed a proof of claim with the bankruptcy court, alleging that Davenport owed them $121, 813.88 under the Note. Id. ¶ 120. Davenport objected, claiming that he owed only $54, 435.00. Id. ¶ 121. The bankruptcy court held a trial to determine the amount due under the Note, and on July 21, 2016, it ruled that Davenport was not in default, and that he owed $53, 557.10. Id. ¶¶ 122-23; Ex. 9 to Am. Compl. [Dkt. # 9-9] ("Bankr. Mem."); Ex. 10 to Am. Compl. [Dkt. # 9-10] ("Bankr. Order").

         Davenport and the Cafe filed a complaint in this Court arising out of defendants' efforts to enforce the Note. See Am. Compl. Plaintiffs have brought a series of common law and statutory claims, and defendants have moved to dismiss the complaint in its entirety pursuant to Federal Rule of Civil Procedure 12(b)(6). Defs.' Mot. to Dismiss Am. Compl. [Dkt. # 11] ("Defs.' Mot"). They argue that all seven counts are barred by the doctrine of res judicata, and alternatively, that they are legally defective and factually unsupported. Defs.' P. & A. in Supp. of Defs.' Mot. [Dkt. # 11-1] ("Defs.' Mem.") at 1-2.[2]

         Because plaintiffs could have brought their claims in the prior bankruptcy proceeding, the Court concludes that all seven of plaintiffs' counts are barred by res judicata. Therefore, the Court will grant the motion to dismiss. This opinion should not be interpreted in any way as an endorsement of defendants' tactics, however.

         BACKGROUND

         Plaintiff Davenport filed this lawsuit on December 15, 2016, Compl. [Dkt. # 1], and filed an amended complaint on February 23, 2017, which added Big Bear Cafe as a second plaintiff. Am. Compl. The amended complaint alleges the following facts, which the Court must accept as true for the purpose of resolving the pending motion to dismiss.

         On September 21, 2006, defendants loaned Davenport $80, 000, and he executed a Note in their favor for $80, 000 with interest, which had a maturity date of September 21, 2016. Am.Compl. ¶ 14; Note. The loan was secured by Davenport's property at 1700 1st Street, NW, Washington, DC, the location of Big Bear Cafe. Am. Compl. ¶¶ 8, 16, 21; see Note; Ex. 2 to Am. Compl. [Dkt. # 9-2] ("Deed of Trust"). Although the Note was made to Davenport individually and not to the Cafe, defendants and Davenport understood that Davenport would use the loan to pay off personal obligations, which would enable him to invest more in the business. Am. Compl. ¶¶ 15-17.

         Under the terms of the Note, Davenport could not begin to pay the principal early, unless he paid it all at once. Am. Compl. ¶ 18; see Note. He could and did pay interest early, though. Am. Compl. ¶¶ 18, 29-30; see Note. For years, Davenport believed he was paying money that he owed on the Note, but he was actually paying ahead of schedule, thereby creating a credit with defendants towards future obligations. Am. Compl. ¶¶ 29-35.

         Pursuant to the terms of the Note, Davenport would be in default if he failed to make a payment and that failure continued for four days. Am. Compl. ¶ 25; see Note. If he was in default, defendants could foreclose on his property. Am. Compl. ¶ 26; see Note. In January 2008, defendants informed Davenport that he was in default on the Note because he had fallen behind the payments on his first mortgage on the property, and that they were accelerating the Note and requiring him to pay the full principal by September 2008. Am. Compl. ¶¶ 36-38. These terms were not included in the Note, and Davenport was in fact not in default. Id. ¶¶ 39, 44. Defendants threatened to foreclose on Davenport's property if he did not make a full "lump sum" payment. Id. ¶ 40. They told Davenport repeatedly that he was required to make additional payments each month, and they demanded that he provide them with financial information about the Cafe. Id. ¶¶ 41-49; see Ex. 11 to Am. Compl. [Dkt. # 9-11] ("Emails"). Davenport complied with most of these requests. See Am. Compl. ¶ 46. Defendants continued to make demands, though, and they persisted in their false accusation that Davenport was in default. Id. ¶¶ 52-53; see Emails.

         Davenport filed for Chapter 13 bankruptcy protection in the U.S. Bankruptcy Court for the District of Columbia on September 2, 2009, which prevented defendants from foreclosing on his property. Am. Compl. ¶¶ 54-55. The bankruptcy court approved Davenport's bankruptcy plan, and he continued making early monthly payments to defendants. Id. ¶¶ 63-66. During Davenport's first bankruptcy proceeding, defendants filed two proofs of claim, one on October 19, 2009, and the other on September 3, 2013, both asserting that Davenport owed only $80, 000 under the Note. Id. ¶¶ 58, 67; see Ex. 3 to Am. Compl. [Dkt. # 9-3]; Ex. 4 to Am. Compl. [Dkt. # 9-4], On November 17, 2014, defendants told Davenport he had been in default since November 2006. Am. Compl. ¶ 73. It was at this point that Davenport obtained legal counsel, and realized he had been over-paying defendants. Id. ¶ 75.

         On March 12, 2015, Davenport filed a Debtor's Corrected Application in his first bankruptcy case, alleging that defendants violated the bankruptcy court's orders when they demanded extra monthly payments. Am. Compl. ¶ 76. Defendants contested this allegation, claiming that Davenport had been in default since the execution of the Note. Id. ¶¶ 77-79. The bankruptcy court denied Davenport relief and did not decide how much he owed under the Note; defendants took the position that he owed $114, 568.07. Id. ¶¶ 81-82; see Ex. 5 to Am. Compl. [Dkt. #9-5].

         Defendants attempted to foreclose on the property in September 2015. Am. Compl. ¶ 90; see Ex. 7 to Am. Compl. [Dkt. # 9-7]. On October 14, 2015, Davenport filed his second Chapter 13 bankruptcy petition to stay the attempted foreclosure sale. Am. Compl. ¶¶ 104-07. During the second bankruptcy case, defendants filed a proof of claim alleging that Davenport owed $121, 813.88 under the Note. Id. ¶ 120. Davenport objected and argued that he owed only $54, 435.00. Id. ¶ 121. The bankruptcy court held a trial to determine the amount due under the Note. It concluded that Davenport owed $53, 557.10 due to a credit in his favor, that he had never been in default, and that defendants' representations regarding how much Davenport owed, his knowledge, and the claimed agreements between the parties contrary to the terms of the Note were not credible. Id. ¶ 123; see Bankr. Mem.; Bankr. Order.

         The complaint alleges that throughout the parties' interactions, defendants have harassed Davenport, and that plaintiffs have suffered as a result of defendants' misrepresentations and actions regarding the Note. See Am. Compl.¶¶ 143-47, 156-57, 162, 176-77, 187-88, 193. Count I alleges wrongful foreclosure on Davenport's property. Am. Compl. ¶¶ 134-47. Plaintiffs allege that defendants initiated foreclosure when they knew or should have known that Davenport was not in default. Id. Counts II and VII allege that defendants breached their contract with Davenport and Big Bear Cafe by instituting foreclosure proceedings when Davenport was not in default on the Note, and that they breached the duty of good faith and fair dealing. Id. ¶¶ 148-153, 191-92. Count III alleges that defendants violated D.C. Code § 28-3301, et seq., by disparaging plaintiffs' business through false or misleading representations of material facts. Id. ¶¶ 158-61. Plaintiffs allege in this Court that defendants harassed Davenport at work, disrupted Big Bear Cafe's operations, made baseless and anonymous complaints to the health department, spread rumors about the Cafe, and falsely listed the property for sale. Id.¶\6\. Count IV alleges that defendants engaged in unlawful trade practices in violation of D.C. Code § 28-3901. Id. ¶¶ 164-65. Counts V and VI allege that defendants tortiously interfered with plaintiffs' business and caused plaintiffs financial hardship by instituting wrongful foreclosure proceedings and conducting in-person sit-ins at Big Bear Cafe. Id. ¶¶ 167-88.

         STANDARD OF REVIEW

         "To survive a [Rule 12(b)(6)] motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal,556 U.S. 662, 678 (2009) (internal quotation marks omitted); accord Bell Ail. Corp. v. Twombly,550 U.S. 544, 570 (2007). In ruling upon a motion to dismiss for failure to state a claim, a court may ordinarily consider only "the facts alleged in the complaint, documents attached as exhibits or incorporated by reference in the complaint, and matters about ...


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